Fraudulent Credit Card Loss Protection Insurance
One company, offering credit card loss insurance, calls consumers
and using scare tactics or misrepresentation says:
||they are a representative of your
credit card company such as VISA or MasterCard;
||that you must have credit card
||that they need to verify your credit
||that they have been instructed
by the Federal Trade Commission to call credit card holders
to obtain their credit card numbers and expiration dates;
||that your credit card numbers may
be wrong and you have to divulge your numbers in order to receive
credit card protection;
||that they are calling to check
the security of your credit card number for possible fraud;
||that they or anyone could get your
credit card number off the Internet at anytime and therefore,
you need to buy credit card fraud protection with a lifetime
||that you are liable for more than
$50 of unauthorized charges on your credit card account;
||tell you that a computer bug could
make it easy for thieves to place unauthorized charges on your
credit card account;
||tell you (or imply) that they are
calling from "the security department" and want to
activate the protection features on your new card.
||that credit card protection would
cost only $99, and
||that you could cancel within 90
Regardless of your decision, they deduct from $289 to $329 from
your credit card, without authorization, for protection which is
already available by law from your card issuer. Plans like what
they offer are both grossly overpriced and not necessary in the
first place. In fact, federal law limits consumers' liability for
unauthorized charges to $50 per credit card, and there is no time
limit for reporting loss, theft, or unauthorized use of a credit
They purport to protect you from financial loss resulting from
the loss or theft of your credit cards. In addition, they falsely
state that you have only 48 hours to report the loss or unauthorized
use of your credit card to avoid liability for the charges. Cancellation
of the service is virtually impossible due to delays, excuses and
busy telephone lines.
Y U Lose
"The Y2K issue had the short-term potential to create a new
class of charlatans looking to make a quick profit at the expense
of unsuspecting individuals," said John Koskinen, Chair of
the President's Council on Year 2000 Conversion.
A Canadian based-company, National Credit Card Protection Ltd.
was charged with falsely representing their credit card protection
program, including protection against potential Y2K-related problems.
They offered a Y2K protection package which consisted of nothing
more than adhesive stickers which were said to safeguard against
potential Y2K problems once they were applied to your credit cards.
"These con artists were making money selling imaginary fixes
to imaginary problems," said Jodie Bernstein, Director of
the FTC's Bureau of Consumer Protection. "They were playing
on consumers' fears about the Year 2000 computer bug and its potential
impact on financial services."
Pay Up or We'll Call Back
In Missouri, complaints were filed against Canadian hucksters
offering to sell a service that would ensure Missourians would
no longer receive unwanted telemarketing calls. The cost -- $289.
"These con artists define brazenness and unmitigated gall," said
Missouri Attorney General Jay Nixon. "They are making telemarketing
calls to sell, at a high price, a useless service that is supposed
to protect you from unwanted telemarketing calls."
Turns out that in Missouri, consumers can call a toll-free number
run by the state and get their name on a list to stop unwanted
telemarketing calls -- at no charge.
Who's Watching Who?
On June 13, 2000, a criminal complaint was issued in the Central
District of California, charging a Canadian resident, Mark
Wilson, ( aka James Eldon ) with mail, wire, financial
institution, and credit-card fraud, after a series of searches
and seizures by law enforcement in Canada and the United States.
Wilson, doing business as OPCO INTERNATIONAL INC.
("OPCO") and related companies, as well as AMERICAN
FRAUD WATCH SERVICES, INC. ("AFWS"), allegedly
operated a fraudulent telemarketing scheme in which U.S. residents
were telephonically contacted from Canada in an effort to have
those residents disclose their Visa and/or MasterCard numbers to
the callers. Those numbers were then billed without authorization
for $299.00 each.
Targeting elderly consumers they would also charge consumers a
fee of $299 for their credit card protection services and more
recently began marketing a fraudulent debt consolidation package
Wilson allegedly caused his employees to make the following misrepresentations,
among others, to victims: 1) that OPCO was their credit card representative;
2) that the victims were qualified to a "gold star" membership
from OPCO, which would entitle them to certain services; and 3)
that OPCO needed to verify the victims’ credit card number,
or were changing the "security codes" on the consumers’ credit
cards, in order to induce the victim to read their credit card
number to the OPCO employee.
He allegedly used several different factoring companies to process
the credit card charges and, as a result, those companies incurred
losses from the excessive charge backs realized. At least one factoring
company could not absorb the losses which reportedly caused a federally
insured financial institution to incur losses in excess of $100,000.
OPCO INTERNATIONAL AGENCIES, INC., 0590739 BC Ltd. d/b/a/ AMERICAN
FRAUD WATCH SERVICES, FRAUD WATCH SERVICES, INC., CENTRAL CORPORATE
SERVICES, INC., CUSTOMER SERVICES INTERNATIONAL NEVADA, INC.,
DEBT SERVICES INTERNATIONAL, INC., GLOBAL HORIZONS, INC., WAYNE
FARROW, CARRIE ELIZABETH HOPE, and MARK E. WILSON,
Fraudulent Fraud Protection
The New York State Consumer Protection Board says it has uncovered
the latest scheme in which a telemarketing organization is selling
questionable and overpriced protection against telemarketing fraud
to "previous victims" of telemarketing fraud.
The board says that a Phoenix-based operation, the Senior Advisory
Council, is offering such protection in unsolicited phone calls
to elderly victims of a Toronto-based group, Consumer Alliance.
Consumer Alliance victimized thousands of people across the United
States who paid $350 for a credit card "protection package" that
turned out to be nothing more than brochures and stickers.
Suspected of targeting calls to elderly victims of the Consumer
Alliance scheme, the Senior Advisory Council is offering a $247
protection package against telemarketing fraud which authorities
claim much of which is available to consumers free of charge, including
a telephone-attachment device (value $50) with a recorded message
that can be activated to reject unsolicited calls.
The president of the Senior Advisory Council, Edward Longoria,
disagreed with the consumer agency on the value of his group's
antifraud package and stated that there was "no connection
or business relationship" between his organization and Consumer
Surprisingly, the Toronto phone number that was being used by
Consumer Alliance is now being used by the International Marketing
Corporation whose chief executive, Steven Winter, indicated the
former operation hasn't existed in two years.
FTC v. FIRST CAPITAL CONSUMER
MEMBERSHIP SERVICES, INC., No. 1:00cv00905 (W.D.N.Y)
||First Capital Consumer Membership
||Worldwide Telcom, Inc.,
Louis Giambrone, Charles A. Barone
||Deceptive practices in violation
of Section 5 and the Telemarketing Sales Rule in connection
with the sale of credit card loss protection services.
||Complaint 10/23/00, TRO
with asset freeze 10/25/00, injunction 11/8/00.
||Motion to intervene by EPX
Operation Protection Deception - Credit
Card Protection Scam Busts
10/00 - The FTC filed complaints against six
groups of companies and their principals as part of a nationwide
enforcement sweep called "Operation Protection Deception" against
credit card protection fraud artists and continues to warn consumers
that under federal law you are liable only for up to $50 of any
unauthorized credit charge on your credit card if it gets stolen
and $500 on a stolen debit card, making any additional protection
1) Consumer Repair Services (CRS) of Conyers,
Georgia and its principals Mark Steinberg, James
DeHart and Frank Ciaravino;
2) First Capital Consumer Membership Services, Inc.
of Buffalo, New York, Louis Giambrone, individually
and as an officer of First Capital, and World Wide Telecom,
Inc. (Worldwide) and Charles Barone,
individually and as an officer of First Capital;
3) Forum Marketing Services, Inc. of Seneca,
New York, Edward Valasquez, Jr. and William
4) Advanced Consumer Services of Orlando, Florida,
and its principals and d/b/a's Anthony W. Andrews, Tracy A. Andrews,
TNT Talks, Inc., and Least Cost Utilities, Inc.;
The FTC slapped Advanced Consumer Services with
a $700,000 penalty to help pay back consumers who were suckered
by the Orlando-based company's deceptive telemarketing practices
of making outlandish claims about the consequences of not buying
their worthless credit card "protection" packages.
5) Capital Card Services d/b/a Capital
Card Protection of Scottsdale, Arizona and its president
Corey M. Harris; and
6) T.S.I. Financial Services (TSI) of Ontario,
Canada, 1306506 Ontario Limited, T.S.I. Limited, T.S.I. Service
Corp. and T.S.I.'s owners Vinny Bubic and Errol
According to the complaints they all violated Section 5 of the
Federal Trade Commission Act by:
1) misrepresenting their identity to consumers;
2) misrepresenting consumers' liability for unauthorized credit card
3) posting unauthorized charges to consumers' credit card accounts.
In addition, the FTC contends that CRS, First Capital and Advanced
Consumer Services misrepresented their refund policies to consumers.
Finally, the complaints charge all defendants with violating the
Commission's Telemarketing Sales Rule through their misleading
sales pitches and that First Capital and Advanced Consumer Services
also violated the TSR by failing to disclose the purpose of their
It is alleged that they used boiler rooms nationwide, or in Canada,
to sell consumers credit card protection packages that provided
no protection at all. After calling a consumer, they sometimes
misrepresented themselves as affiliated with a particular credit
card issuer or bank to gain their confidence.
Through their pitch, they relied on the consumers' limited knowledge
of the United States' credit card protection laws, claiming that
if a consumer's card was stolen they could be liable for hundreds,
if not thousands, of dollars in unauthorized charges.
At times, the defendants allegedly also said that crooks could
get consumers' credit card numbers over the Internet and use these
numbers to rack up unauthorized charges - another misrepresentation.
They then immediately billed consumers who accepted their offer
between $259 and $400 for the "service" and those consumers
who declined the offers were often charged anyway.
Consumers who later attempted to cancel the "protection" were
given the runaround by the defendants, hoping to delay consumers
from reporting the charge to their credit card issuer. Many consumers
were given misleading information about the defendants' refund
Others, who did not want the protection and were billed for it
nonetheless, never received a credit card refund.
The Commission also returned to court seeking to reopen the judgment
against Creditmart Financial Strategies, Inc. and Maurice Verrelli (Civ.
No. C99-1461), who materially misrepresented or omitted information
on their financial statements and made false statements about their
The Commission originally had agreed to suspend the final judgment
of more than $9 million and require the defendants to pay a lesser
amount. Upon discovery of the defendants' false statements, the
Commission requested that the court reopen the judgment and assess
the full $9 million.
DECEPTIVE TELEMARKETING SCRIPTS
To aid its deceptive pitch, First Capital prepared written scripts
for use in telemarketing cardholders.
False Affiliation with Visa/MasterCard
After First Capital’s telemarketer identifies his or her
name, the script begins:
"I’m calling from the Credit Card Security Centre
of First Capital, regarding the security on your VISA/MC accounts.
There is no need to be alarmed, however due to an increase
in computer related frauds we have made some very important
changes to our policies, and we are trying to reach all cardholders
ASAP. My job here today is simply to inform you of these changes
and update our files. We have you at [address]. I’d like
to issue you the new 1-800-number to call in the event your
card is lost or stolen or if an unauthorized charge appears
on your statement."
First Capital bolsters its false relationship with Visa and MasterCard,
while simultaneously inducing cardholders to disclose their full
account number, by noting not only the first number but the sequence
of numbers on the card:
"OK, you should see that the card begins with a (4/5)
and there are four sets of four numbers across the card."
After the cardholder discloses the number, First Capital wholly
omits, or fails to adequately disclose, material terms of the offer
and sale of its programs.
"Great. Now you should be receiving your security package
in 10 business days. It will outline to you what computer fraud
is and how it effects you as a cardholder and as a consumer."
First Capital’s script further provides that, along with
a reduction of the "$50 deductible" (which is never explained
in the telemarketing pitch as a statutory liability cap), the cardholder
"... will receive a low interest balance consolidation,
which will allow you to potentially lower your current rate
to as low as 8.5%. This generally can save a cardholder as
much as $200.00 to $300.00 annually in fees."
In fact, cardholders do not "receive a low interest balance
consolidation" that lowers their rates or annual fees but
only a list of banks to which cardholders may apply for credit
cards which may, or may not, allow them to consolidate debt at
a lower interest rate or save on annual fees.
"You will have 30 days to review the package before making
a final decision. However we do hold this amount in order to
issue the package."
In fact, First Capital wholly omits in both its scripted telemarketing
call and its subsequent written packets any description of the
30-day trial review, cancellation and/or refund procedures, including
specifically that cardholders must return the written packet in
order to qualify for a refund. First Capital takes the cardholder’s
recitation of his or her account number as consent to the ultimate
charge for its programs.
Finally, First Capital directs its telemarketers to "transfer" the
cardholder to a "Verification Officer," who then ostensibly
records the cardholder’s "verification" of his
or her authorization and assent to purchase First Capital’s
"The last step to complete this process is to speak with
a security verification officer. He or she will make sure you
In fact, First Capital fails to make sure cardholders "understand
everything," in that its "confirmation" or "verification" omits
materials terms of the deal and fails to rectify false impressions
and half-truths introduced earlier in unrecorded portions of the
ILLUSTRATIVE RECORDED TELEMARKETING CALL
First Capital’s telemarketers amplify the facial deception
and/or omit clarifying statements in their script by diverging
from it with further misrepresentations in an effort to secure
the cardholder’s account number.
The following is taken from an audio tape of a telemarketing call
on August 17, 1999 between First Capital and a witness cooperating
with the FBI.
"Ma’am this is Shane Douglas from First Capital
Visa MasterCard. It’s regarding the security on
your account. We’ve had a problem with computer
"And you’re also going to be issued your
verification number by a verification officer. So I do
need you to get one of your cards, a pen and a paper
while I hold on for you ma’am…I will verify
one of your accounts to be sure you are the proper cardholder
and you are in good standings."
Cooperating Witness ("CW"):
"You’re going to tell me what my number is."
"Yes, yes, we have that information ma’am."
"You wanted me to read you your number ma’am,
beginning with the 4? Is that what you meant?
"Okay. That is against the law ma’am. Until
I know I am speaking to the proper cardholder."
So I need to read it to you?
"Yes. There is a federal law, ma’am."
"And you’re speaking with Officer Shane Douglas…First
Capital is the Fraud Division of Visa MasterCard."
"That’s called First Capital?"
"Yes. We are the Fraud Division of Visa MasterCard."
"So you want the address of the Fraud Division?"
"Okay. I am going to just okay that with my supervisor…And
it will take a half a second."
|VOICE IN BACKGROUND:
"Make one up. Make one up."
"Yes, ma’am? I’m sorry about that.
I had to speak with a supervisor to make sure that information
can be authorized…Okay? I am prepared to give that
to you now."
All right. I've got a pencil.
|Shane (giving incorrect address):
"Okay. The offices are 1143…Patrick Street,
Buffalo, New York and that is Suite 502."
"I feel real nervous about giving you my number
over the phone. Can’t I mail it to you or something?"
"Ah, it’s a simple verification process,
ma’am which all cardholders must go through---"
|CW (after requesting a supervisor):
"I’m kinda nervous about giving my number
over the phone just ‘cause I don’t know who
|Christopher Johnson (supervisor):
"Well, it’s information we already have,
we just have to make sure we verify it. I would love
to be able to authorize him to read you the card number
for you…but by federal law we’re, we’re
just not required to do it, we can’t do it…But
if it’s any consolation to you at all, unless you’re
signing a sales draft, you cannot be held liable for
any charges…It’s a simple verification process;
it just goes into the computer to verify the information
we already have."
"Are you an officer as well?"
"But wouldn’t an officer work for a Sheriff’s
Department or something--"
"No, you see, what happens is we go through a rigorous
process over which they check everything out and you
are issued a federal badge number at the end of it all.
And that’s it. And we investigate fraud for Visa
and MasterCard…We’re actually in Buffalo,
New York. We’re the office right next door to the
Visa and MasterCard office there."
"And then if I give you my number you send me what?"
"Okay. We send you your package. Okay? Which basically
gets you your 100% coverage back again, but you have
30 days before making any final decision on anything
anyway…It’s a zero-risk policy, ma’am;
no one can make you take it."
"But we are required by federal law to tell you
that you do not have your 100% protection any more. As
we did every other Visa and MasterCard holder."
"When did it expire?"
"Last December Visa and MasterCard decided they
would no longer be covering for computer fraud for the
simple reason that they can no longer financially support
it. It’s just -- it’s so bad now."
"…right now you are 100% liable on all charges
unfortunately. See we want to get you your 100% coverage
back again. You are protected for 30 days for free while
you are reviewing the package and making your decision
whether you wish to keep it or not…Anyway, like
I said, the package comes to you in 10 days after verification
by courier, at which point your 30 days of free coverage
begins while you go through it and decide whether you
want to keep it or not…And that’s it. You’re
under no obligation whatsoever."
"Well, it sounds good and I would like to do it
but I’m just, I’m just too afraid to--"
"I totally understand ma’am, but like I said,
it cannot be used against you any shape, way or form,
we’re the same company that has been protecting
you all these years. We have been doing it for Visa and
MasterCard for 13 years. I mean we are your security
service. It’s a simple verification that cannot
be used against you in any way. Just-- we just have to
make sure your the authorized cardholder before we can
you out your package."
"A credit card is basically nothing. I mean, ah,
you know, just the number--"
"Oh, well how come they--how come they always say
make sure and rip up your receipts…"
"No, as, as long as you don’t sign it you’re
"Well, when hackers penetrate the database, ma’am,
there’s not very much you can do about that."
"But I thought I wouldn’t be responsible
"Up until December that was true…up until
last December, if you were defrauded, you simply called
a number on the back of your card and then Visa MasterCard
would fax it over to us, we would investigate it for
48 hours at which point we would turn it over to the
insurance company and they would take care of it…It’s
just that they won’t cover it anymore."
"If I could mail you the money in or you could
mail me something that would be great, but I really don’t
feel" comfortable giving my number over the phone.
"Like I said, ma’am, it’s a simple
verification that cannot be used against you in any way."
"Yeah, but this way I don’t have to stay
awake at night worrying about it --"
"-- because unfortunately without going through
verification it does go in as a decline and in the event
you are defrauded it basically says that you have been
explained everything and you are assuming 100% liability
on all charges."
Through such false, fraudulent, misleading and deceptive
representations and techniques, First Capital has obtained and
caused charges to the account numbers of cardholders.
DECEPTIVE WRITTEN MATERIALS
After First Capital has obtained and/or caused a charge to a cardholder's
account number, they sent a letter and accompanying written materials
to the cardholder explaining its Credit Card Protection Program
and Low Interest Balance Consolidation Programs ("packet")
which contains the following items:
a double-sided introductory letter to "New Members;"
a document entitled "100% Satisfaction Guarantee!;"
a purported "agreement...for credit card protection
services" titled "This document certifies that
the bearer is protected under the First Capital CMS Credit
Card Protection Plan;"
a card-stock folder entitled "Credit Protection Membership" enclosing
explanatory items in the "membership package," including
an 8 1/2" x 11" fold-out brochure entitled "Credit
four card-stock inserts, an envelope, and a gift certificate;
two single-sided registration forms--a "Credit
Card Registration Form" and a "Documents
and Valuables Registration Form; and finally
a 10-page booklet entitled "Low Interest Balance Consolidation
Program," with a loose single-page "Credit Offer
Info Sheet" referenced therein.
The packet contains misrepresentations to Minnesota cardholders
that are both facially fraudulent, misleading and deceptive and
wholly inconsistent with its oral representations during the telemarketing
Throughout its written materials, First Capital variously advertises
two toll-free numbers, (800) 556-3740 or (800) 988-7626, as its "Consumer
Hotline," "Consumer Complaint Referral Hotline," "Membership
Services," "Customer Service," and as its connection
to "Customer Service Representatives." In its cover letter
to cardholders they state: "We pride ourselves on exceptional
customer service at First Capital Consumer Membership Services!"
In fact, First Capital’s customer service is not remotely "exceptional" for
cardholders routinely receive busy signals, long delays on hold,
transfers and/or disconnection when contacting the toll-free numbers.
Misrepresentation of Cancellation/Refund Procedures
First Capital represents that cardholders who are "not 100%
satisfied" with First Capital’s program will receive
a full refund simply by calling its Customer Service Representatives:
In fact, First Capital does not allow cardholders to obtain a
prompt refund simply by calling its "courteous" and "knowledgeable" Customer
Service Representatives. First Capital requires cardholders to
return the packet of written materials in order to qualify for
a refund and, even when cardholders do timely return the packet,
First Capital fails to issue refunds consistent with both its written
and oral representations.
In fact, First Capital’s customer service representatives
frequently give you months of reassuring runarounds, contradictory
and broken promises - if you can get through - then deceptively
shift the "refund" responsibility to cardholders who
are left to dispute the charge with their issuing bank or to complain
to their local Better Business Bureau or law enforcement agencies.
Coverage & Payment Terms of the "Agreement"
Let it be known that First Capital Consumer Membership Services
(hereafter known as First Capital CMS) has entered into an
agreement with the bearer of this certificate (hereafter known
as The Client) for credit card protection services. The Client
has purchased 1 (one) year of credit card protection from First
Capital CMS and therefore, as per their verbal agreement, The
Client is hereby entitled to receive an additional 9 (nine)
years of bonus coverage without incurring any additional charges
or loss of coverage.
March 23, 2001 -- Consumer Action, a national
nonprofit education and advocacy organization, is cautioning all
consumers that it is not affiliated in any way with the "Consumer
Action Center," a telemarketer that deceptively sells
credit card protection services.
Based on complaints since 1997, that company makes cold calls
to individuals to sell useless credit card protection packages.
They have tricked people into giving out their credit card numbers
and although charged $99-$189, they receive only a worthless folder
of information, or in some cases, nothing at all. Existing federal
laws offer far greater protections for credit card holders at no
Under the federal Telemarketing Sales Rule, it is illegal to make
false or misleading statements to induce consumers to purchase
services. The FTC has brought action against many telemarketing
companies selling worthless credit card protection, including:
||Bank Card Security Center.
||Tracker Corporation of America.
doing business as Consumer Protection Services, sold a worthless
credit card protection program for a fee of $189. In a 1998
settlement of the charges, the company was banned from selling
credit card protection or registration programs.
||Universal Marketing Services and
United Marketing Group. Victims' credit cards were charged
up to $199. The company was banned from engaging in, or assisting
others in engaging in, telephone sales of credit card registration
or credit card protection services.
Other companies the FTC has charged with making false claims about
credit card protection services include American Fraud Watch Services,
The Ascendix Group, Central Corporate Services, Credit Mart Financial
Strategies, Customer Services International Nevada, Debt Services
International, Fraud Watch Services, Global Horizons, Liberty Direct,
OPCO International Agencies, Source One Publications, and 0590739
04/25/02 Under an FTC settlement, Advanced Consumer Services of
Orlando and two of its principal officers, Anthony W. Andrews
and Tracy A. Andrews, agreed to pay about $700,000 to
The FTC had alleged that telemarketers working for ACS scared
consumers into spending hundreds of dollars each for protection
they didn't need against unauthorized credit card charges. Under
federal law, cardholders hit with unauthorized charges are liable
for only $50 worth of charges to a credit card account and $500
to a debit account.
The telemarketers told consumers they were calling on behalf of
their credit card issuers or a government agency and claimed criminals
were stealing their credit card numbers, and that they could be
held responsible for hundreds or thousands of dollars unless they
bought extra protection.
In some cases, consumers were charged for protection packages
whether they wanted them or not.
The companies TNT Talks Inc. and Least
Cost Utilities Inc., which did business as Advanced
Consumer Services, were also defendants in the FTC suit. Under
the settlement, which must still be approved by the court, none
of the defendants admitted any wrongdoing or liability.
The agreement also permanently bans the defendants from selling
any credit-related goods or services. To conduct future telemarketing
activities, the defendants must first post a $300,000 bond.
10/26/02 Wisconsin - A customer at New Richmond's S&C Bank
- recently got a call from a telemarketer offering to sell her "credit
Moments after she hung up on the caller (she doesn't have credit
cards), the phone rang again.
"If you hang up on me again, you will be subject to a $5,000
fine and/or arrested," the telemarketer allegedly told her.
Flustered, the woman ended up giving the caller her Social Security
number and some other personal information.
The telemarketers tell bank customers that they have to have this
coverage - that it's insurance that covers credit card balances
- and that they will be charged a certain dollar amount per month
Before agreeing to make a payment, the bank asked for and received
a telephone number in Tampa, Fla. Calling to verify the request,
the bank was then handed off to other offices in New Mexico, Pennsylvania
and, finally, Maryland where the company's officials identified
themselves as Security Communications, a firm
that specializes in identity theft protection.
Fraud Forum Fined
04/03 - Edward Velasquez and William John Velasquez of New York did not
admit or deny guilt but agreed to pay back $131,000 to settle charges
that they sold worthless credit-card protection services.
The FTC sued the two men in Oct. 2000, charging that they bilked
thousands of consumers by selling them unnecessary credit-card
protection services -- sometimes billing them without their consent
after obtaining their credit-card numbers for "verification
Through their company, Forum Marketing Services Inc.,
the brothers falsely claimed that credit card issuers Visa and MasterCard
had changed their policies and would hold consumers liable for unauthorized
charges over the $50 federal law limit. The telemarketers offered insurance
against such charges, typically for $199 to $299.
They have also agreed to post a $50,000 bond should they decide
to get back into the telemarketing business in the future, the
05/30/03 Barrie, Ont. —A defunct company that purported
to offer low-interest credit cards to elderly women has been fined
$500,000 after pleading guilty to defrauding close to 2,000 Americans
in a telemarketing scheme.
More than 100 police officers from four different police services,
along with officials south of the border, spent a year investigating
the scam aimed at elderly women in the United States.
The basis of the original business was sound, court heard Friday.
A business owned by Gordon Levoy, 56, of Collingwood, Ont., sold
timeshare resort packages.
But that business operated only during evenings.
During the day, another business, Bio Source Financial, sold credit
card fraud protection in 2000.
It sold its product to U.S. residents for a one-time fee of $299
(U.S.) on commission for an unrelated company, Consumer Alliance.
Mr. Levoy, along with vice president Jason Williams and marketing
manager Daniel Longo, decided the company would no longer operate
as a broker.
They designed and marketed their own Bio Source Financial benefits
Customers thought they would get a credit card with an interest
rate of 8.5 per cent.
Instead, they received a package containing promotional pamphlets
and discount coupons.
It included a list of banks that offered introductory low credit
card interest rates.
By March 2001, Bio Source had call centres across central Ontario
in Barrie, Owen Sound, and Walkerton as well as its Collingwood
Up to 40 telemarketers worked at each call centre selling a low-interest
credit card for a one-time fee ranging from $299 to $399 (U.S.)
to American residents.
Sales were as high as 600 packages per call centre each week.
From October 2000 to July 2001, Mr. Longo made $95,290 while Mr..
Williams pulled in $337,698.
The estimated value of the fraud is $900,000.
Mr. Williams, 30, of Blue Mountain, Ont., and Mr. Longo, 42, of Toronto,
pleaded guilty to fraud Friday and will be sentenced July 7.
Charges against Mr. Levoy were dropped.
Crown lawyer Joan Barrett asked for 18-month conditional sentences,
which would put them under house arrest, but allows exceptions,
including daily trips to work.
Mr. Williams would also be fined $50,000.
Lawyers for the men asked for three months' house arrest.
U.S. Federal Trade Commission economist, Dr. W. Russell Porter,
concluded in a report the Bio Source package had a liquidation
value "most certainly less than zero."
The U.S. commission has launched a civil suit against Bio Source
and Mr. Levoy, Mr. Williams and Mr. Longo.
Source: Globe and Mail
Trade Commission v. Icon America, Inc., et al
The Federal Trade Commission announced the settlement of this matter.
The complaint alleged that the defendants deceptively used telemarketing
to sell credit card loss protection services to consumers, telling consumers
that the company's loss protection services would cover any unauthorized
charges due to card theft. Under the terms of the stipulated final order,
the defendants and their principals are barred from: (1) making the types
of misrepresentations alleged in the complaint; (2) violating the TSR
or assisting others in doing so; and (3) selling or transferring their
customer lists. The order also contains a suspended judgment for $1.5
million and requires the defendants to pay $25,000 for consumer redress.
Trade Commission v. STF Group, Inc., et al.
The Federal Trade Commission filed a complaint alleging these defendants
sold phony credit card loss protection and discount medical cards. The
complaint also alleged that the defendants charged consumers' credit
cards and debited their bank accounts without authorization.
Scammers Who Pretend to Stop Scammers
Your phone rings, and the caller on the other end identifies himself
as a representative of the fraud department of major credit card
provider (VISA, American Express, etc.) with no mention of an issuing
bank. They will imply that the phone call is a warning for fraudulent
activity on your card.
The caller tells you he has identified potentially fraudulent
charges on your account. They tell you about specific charges,
ranging from $300 to $500, at specific stores which they believe
After hearing the specifics, many consumers become alarmed, immediately
dispute the charges, and ask for them to be removed.
At that point, the caller tells you they will be glad to help,
and will postpone the charges in question. Then, once they have
your trust, they tell you there is no need to cancel your current
card. The caller says he just needs to verify you still have it
on you, and asks you to simply read the numbers on the card, including
the special three digit "not-in-person" or "card
not present" purchase code on the back.
Shortly thereafter they charge your card with an amount just below
the $500 questionable purchase mark.
Articles on Credit Card Insurance scams.